Hong Kong home prices could drop 30% by end-2015: Barclays

[CityFarmer]

Fall at least 30% by end of 2015? Not sure it will be so drastic...

Hong Kong home prices could drop 30% by end-2015: Barclays

HONG KONG – Hong Kong home prices are expected to fall at least 30 per cent by the end of 2015 as income growth stalls and supply increases, the Bloomberg news agency cited Barclays analyst as saying on Monday.

Barclays joins Bank of America and UBS who have over the past month forecast that home prices in the city will drop as much as 25 per cent as demand wanes because of government curbs and the expectation of rising interest rates.

A “downward spiral of home prices is likely” as developers and homeowners adjust expectations, Barclay analysts Paul Louie and Zita Qin wrote in a report on Monday. They assigned a “negative” rating to the Hong Kong property sector and said office prices will drop 20 per cent.
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http://www.todayonline.com/business/hong...5-barclays

[soros]

30% fall could be really painfull for many property investors as many flats are financed with 70% mortgage loan.

If the market price falls by 30% as forecast by bloomberg - i.e market price falls down to the level of the mortgage loan, and the mortgage banks invite the borrowers to top up and reduce their loan back down to 70% of MV ???

[evolance]

Even though i am a singapore property owner,i longed for the day for sg property tto correct 20 to 30 percent too..

On the surface,we seem to b reaching hk current condition soon?supply abundance,curbs on FT,although tje white papere state otherwise

[Clement]

30% fall could be really painfull for many property investors as many flats are financed with 70% mortgage loan.

If the market price falls by 30% as forecast by bloomberg - i.e market price falls down to the level of the mortgage loan, and the mortgage banks invite the borrowers to top up and reduce their loan back down to 70% of MV ???

I think it will depend on when the property was purchased or loan was taken up in the event of refinancing. Those who purchased awhile back would have enjoyed some form of appreciation so a 30% pullback from current prices might not cause margin calls. Those latecomers however will probably be hit. From what I know about housing in Hong Kong, a large proportion of the population are renting their homes, so maybe the impact will not be as drastic as if it occurred in Singapore?

[BlueKelah]

30% fall could be really painfull for many property investors as many flats are financed with 70% mortgage loan.

If the market price falls by 30% as forecast by bloomberg - i.e market price falls down to the level of the mortgage loan, and the mortgage banks invite the borrowers to top up and reduce their loan back down to 70% of MV ???

I think it will depend on when the property was purchased or loan was taken up in the event of refinancing. Those who purchased awhile back would have enjoyed some form of appreciation so a 30% pullback from current prices might not cause margin calls. Those latecomers however will probably be hit. From what I know about housing in Hong Kong, a large proportion of the population are renting their homes, so maybe the impact will not be as drastic as if it occurred in Singapore?

property crash will always be painful for renters as some landlords will be forced to sell and chase them out. imagine having no place to live suddenly...

in hong kong speculation is just as bad as in china, something has got to give at some point. just wait till interest rates go up to historical highs.

[specuvestor]

For impact just reference during SARS when property prices halved and only 10-20% premium to Shenzhen.

But I agree barring another crisis, unlikely to drop 30%. If can deflate 15% in orderly manner already very good.

[etan]

Somehow I have got this funny feeling for some time already.

Most crisis that hit us, are mostly connected with financial and property which I think are man-made, save for SARS and the like which is unavoidable.

Of late, we hear of financial problems happening in different countries.
The problem appears big, but not big enough to bring down our Asian economy.
These countries somehow manage to find a solution or a way out, never mind how temporary it may be.
I always like to think the solutions appear to be superficial, not solving the root of problems, hence, these so-called solutions created more and bigger problems. Agree with me so far? I am not economist, so if I am wrong, pls don't shoot at me, it's my rubbish opinion only. Afterall I am not paid to help them solve these problems. Hahaha!

I guess some of us have been waiting and waiting for that 'something big and terrible' that will befall on us one day - the Asian region -that will hit us soon, but time and again, it didn't happen, and we are still waiting for it to happen anytime. We are waiting for the perfect storm which will come when it wants to come.

Just the gist of it, the crisis go in circles: from America to Europe then to? Will Asia be caught next?

Meanwhile just eat, sleep, relax and enjoy!

Looking back, this is what I found from Mr Google:

http://en.wikipedia.org/wiki/List_of_economic_crises

Snapshot from 20th/21st century
20th century[edit]
Panic of 1907, a U.S. economic recession with bank failures
Wall Street Crash of 1929 and Great Depression (1929–1939) the worst depression of modern history
OPEC oil price shock
Secondary banking crisis of 1973–1975 in the UK
Japanese asset price bubble (1986–2003)
Bank stock crisis (Israel 1983)
Black Monday (1987)
Savings and loan crisis of the 1980s and 1990s in the U.S.
1991 India economic crisis
Finnish banking crisis (1990s)
Swedish banking crisis (1990s)
1994 economic crisis in Mexico
1997 Asian financial crisis
1998 Russian financial crisis
Argentine economic crisis (1999–2002)

21st century[edit]
Late-2000s Financial Crisis or the Late-2000s recession, including: 2000s energy crisis
Subprime mortgage crisis
United States housing bubble and United States housing market correction
2008–2012 Icelandic financial crisis
2008–2010 Irish banking crisis
Russian financial crisis of 2008–2009
Automotive industry crisis of 2008–2010
European sovereign debt crisis

[Clement]

Somehow I have got this funny feeling for some time already.

Most crisis that hit us, are mostly connected with financial and property which I think are man-made, save for SARS and the like which is unavoidable.

Of late, we hear of financial problems happening in different countries.
The problem appears big, but not big enough to bring down our Asian economy.
These countries somehow manage to find a solution or a way out, never mind how temporary it may be.
I always like to think the solutions appear to be superficial, not solving the root of problems, hence, these so-called solutions created more and bigger problems. Agree with me so far? I am not economist, so if I am wrong, pls don't shoot at me, it's my rubbish opinion only. Afterall I am not paid to help them solve these problems. Hahaha!

I guess some of us have been waiting and waiting for that 'something big and terrible' that will befall on us one day - the Asian region -that will hit us soon, but time and again, it didn't happen, and we are still waiting for it to happen anytime. We are waiting for the perfect storm which will come when it wants to come.

Just the gist of it, the crisis go in circles: from America to Europe then to? Will Asia be caught next?

Meanwhile just eat, sleep, relax and enjoy!

Looking back, this is what I found from Mr Google:

http://en.wikipedia.org/wiki/List_of_economic_crises

Snapshot from 20th/21st century
20th century[edit]
Panic of 1907, a U.S. economic recession with bank failures
Wall Street Crash of 1929 and Great Depression (1929–1939) the worst depression of modern history
OPEC oil price shock
Secondary banking crisis of 1973–1975 in the UK
Japanese asset price bubble (1986–2003)
Bank stock crisis (Israel 1983)
Black Monday (1987)
Savings and loan crisis of the 1980s and 1990s in the U.S.
1991 India economic crisis
Finnish banking crisis (1990s)
Swedish banking crisis (1990s)
1994 economic crisis in Mexico
1997 Asian financial crisis
1998 Russian financial crisis
Argentine economic crisis (1999–2002)

21st century[edit]
Late-2000s Financial Crisis or the Late-2000s recession, including: 2000s energy crisis
Subprime mortgage crisis
United States housing bubble and United States housing market correction
2008–2012 Icelandic financial crisis
2008–2010 Irish banking crisis
Russian financial crisis of 2008–2009
Automotive industry crisis of 2008–2010
European sovereign debt crisis

I agree with you to some extent. I think we must distinguish a financial crisis from an economic crisis. A financial crisis, is normally related to asset prices, be the asset real estate, bonds or currencies. They do not in themselves cause problems to the larger economy. Financial crises rely on feedback mechanisms to sustain themselves and cause real damage to the broader economy.

The main feedback mechanism that spreads the crisis is the need for the financial sector to deleverage to ensure solvency. For an example of a financial crisis that did not cause much dislocation in the real economy, you can look at the 1994 bond market crash, where hedge funds and other shadow banking operations were badly hit by an interest rate hike.

The actions of governments so far in tackling the crises have been to stop any self reinforcing feedback loops that might cause asset prices to fall further. Following that, they tend to provide cheap credit to enable the financial sector to repair their balance sheets quickly. The problem with such an approach is that in creating a conducive environment to help banks recover, the low short term rates attract non banks to engage in shadow banking style activities (borrow short term, lend long term.)

The question is, when the music stops and the liquidity starts to dry up, will we see something more like 1994 or 2008? I lean towards the former.

[etan]

Thanks for kind explanation.

You write like an academic. You are definitely much more educated than me.

I can only write in layman language using some common sense from what I have read.
I was afraid some may not understand what I was talking about, or I couldn’t express my views well.
That’s why I make myself clear first: don’t shoot me. Hahaha!

I am quite happy that you bothered to explain the difference between financial and economic crisis. Actually I take it to mean that they are one and all the same.

But never mind understand or not so understand, we are all looking out for that POT OF GOLD!

And I believe you will get more than me!

I agree with you to some extent. I think we must distinguish a financial crisis from an economic crisis. A financial crisis, is normally related to asset prices, be the asset real estate, bonds or currencies. They do not in themselves cause problems to the larger economy. Financial crises rely on feedback mechanisms to sustain themselves and cause real damage to the broader economy.

The main feedback mechanism that spreads the crisis is the need for the financial sector to deleverage to ensure solvency. For an example of a financial crisis that did not cause much dislocation in the real economy, you can look at the 1994 bond market crash, where hedge funds and other shadow banking operations were badly hit by an interest rate hike.

The actions of governments so far in tackling the crises have been to stop any self reinforcing feedback loops that might cause asset prices to fall further. Following that, they tend to provide cheap credit to enable the financial sector to repair their balance sheets quickly. The problem with such an approach is that in creating a conducive environment to help banks recover, the low short term rates attract non banks to engage in shadow banking style activities (borrow short term, lend long term.)

The question is, when the music stops and the liquidity starts to dry up, will we see something more like 1994 or 2008? I lean towards the former.

[godjira1]

actually one thing to think about: in a post QE world what will happen to asset prices?

I see a big deflation potential in many asset classes (bonds, equities, property), a big xfer of wealth back to the saver and unleveraged in terms of purchasing power..... before it all starts again of course as the endless list of crises show us. it is just human nature.

i for one believe that this is the time to hold a decent chunk of cash and wait for the inevitable, and that we are near the top of a cycle (if somewhat atypical bull run). am curious to hear what alternative asset classes might do well thru the storm.